An Analyst and a World Investor Have Two Different Views (NTAP)

Robert W. Baird added fuel to the selling fire when it downgraded shares of NetApp (NASDAQ: NTAP). The Milwaukee-based investment company lowered its rating on NetApp from an “outperform” to “neutral” in addition to decreasing the price target on the stock from $40.00 to $30.00. Considering the wide swath of selling across the tech sector today, traders did not need much arm-twisting to unload shares of the company.

Investors, however, may take heart from an article written by the Inside Monkey that came across the wires after the close. According to the author, famed investor and hedge-fund manager George Soros loves NetApp stock. Apparently Soros holds a position of roughly $142 million in the stock. The article writer believes NetApp is the fifth largest equity holding in the Soros portfolio. Other hedge fund managers holding on to the stock include Lee Ainslee, Ken Griffin and Jim Simons. Will traders tomorrow continue to take their cue from an analyst at Robert W. Baird, or will they side with on one the largest investors in the world?

As expected, the downgrade sent traders into a selling frenzy. The stock gapped down $1.34 on the opening bell to begin the day $28.55. Within the first 30 minutes of the session, the stock touched both the high ($29.27) and low ($28.52) prices for the day. For the remainder of the day, traders exchanged shares in a 25-cent range between $29.00 and $28.75. The stock finished the session with a loss of nearly 4% to close down $1.14 at $28.76. Traders exchanged 12.8 million shares during the day, or double the number traded on an average day.

Over the last 12 months, NetApp shares reached a high of $46.80 set in April. Aided by an earnings warning in May, the stock declined by 40% to a 52-week low at $27.79 as the calendar approached June. Shares bounced in August after the company ensured analysts that earnings in the second quarter would meet their expectations. Traders might wonder if today’s sell-off signals a new low in the future.

Last Wednesday, NetApp and Citrix (NASDAQ: CTXS) announced the continuation of their collaborative efforts focused on accelerating the adoption of enterprise cloud deployment. According to the release, the partnership makes cloud deployment simpler for mutual customers and improves the speed toward hybrid and private clouds.

The company will report its earnings in November and the consensus view of 38 analysts expects the second quarter to show a profit of $0.48 per share. For fiscal year 2013, which ends in April, analysts expect NetApp to earn $2.11 per share. A majority of those covering the stock currently have a “hold” rating. The average target price on NetApp shares is $37.60.

NetApp provides data storage systems and data management solutions for information technology infrastructures. The company is also an original equipment manufacturer (OEM) storage provider, which allows OEMS to offer information technology and storage solutions to specific markets and customer requirements. The Sunnyvale, California, company was founded in 1992.

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Published by Alan Masterson

Alan has over 25 years of trading experience in the U.S. equity markets. He began his career in finance working on a program trading desk specializing in over-the-counter stocks. His career progressed from that point to his current position as senior trader on an institutional trading desk. In the evenings, Alan teaches economics at a local community college. He has contributed articles to various publications over the last six years, including feature articles for an economics magazine and various financial blogs. You may contact Alan via his email (alanmasterson@wallstreetpr.com) or his Google+ page (https://plus.google.com/103338576216002376250).